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It Trickles Up … Not Down!

Trickle-down economics is a theory that says benefits for the wealthy trickle down to everyone else. It is a theory that makes sense … on paper. In reality, it has been tried more than once and proven that it does not work. Repeat after me: Trickle-down economics does not work. It does not trickle down, but rather pools in the bank accounts and investment portfolios of those who already own most of the nation’s wealth.

The theory is that if the government provides substantial tax cuts, industry de-regulations, and negotiates trade agreements that favour the big businesses of the nation, those big businesses will earn higher profit margins, and will therefore use their additional wealth to build more factories, hire more people, create more jobs, increase workers’ wages and benefits. The workers will have more money to spend, will buy more ‘things’, thereby increasing the profits of the big businesses who will use that additional profit to … well, you get the picture, right? Sounds about right, don’t you think? Yes, it sounds good, looks good on paper or white boards in boardrooms and congressional offices around the nation … but it does not work in reality.

Ronald Reagan tried it in the 1980s, thus leading to some calling it ‘Reaganomics’. It did not work. The U.S. economy was in a slump when Reagan took office in 1981, so he did two things: lowered taxes and increased government spending. Now, at this juncture I want to take a minute to let you know that I do not intend to provide a lesson in economics. I am savvy enough, but I am not an economist, and I typically leave these discussions to fellow-blogger Erik Hare over at Barataria. But Erik sometimes goes into more depth than is needed, as he IS an economist. Since I am not, I will put what little explanation I deem necessary in layman’s terms. So, using an over-simplification to explain what happened under Reagan …

Think of it on a personal level. You decide you want to enjoy life more, so you cut back your hours, thereby reducing the income from your job. At the same time, since you want to enjoy life more, you spend more money on such things as dining out, travel and household goods & clothing. For a while, perhaps, life is great, but then … the homeowner’s insurance comes due, there is a huge auto repair, and your daughter starts college. Uh-oh … it just caught up with you and now you must take out … loans. Go further into debt.

This is what happened under Reagan. He decreased the federal revenue by cutting taxes, increased federal spending in order to stimulate the economy, and for a while there was the illusion that it was working. People had more money, and spent more, and they were happy. But … time came to pay the piper and the money wasn’t in the treasury, so our federal debt tripled from $997 billion in 1981 when Reagan took office to $2.85 trillion in 1989 when he left office. Money is a finite resource. If you rob from Peter to pay Paul, as the saying goes, then soon you will need to rob from somebody else to pay Peter back. And remember that debt is not free. Take out a loan for that new car, and you will pay approximately 4.5% in interest. The federal government must also pay interest on its debt.

Then in 2001, George W. Bush tried the theory once again, cutting income taxes in an effort to stimulate the economy. Which it did … temporarily, until unemployment began to rise. So in 2003, he further cut taxes on business. According to the theory, the tax cuts should have helped people in all income levels. In fact, the opposite occurred. Income inequality worsened. Household income rose 6 percent for the bottom fifth. And 80 percent for the top 1 percent who saw their income triple. Instead of trickling down, it appears that prosperity trickled up.

Okay, so we see that it does not work, but why? I could point you to any number of studies with lots of graphs and charts to show inverse correlations, etc., but we would all be bored. The bottom line, I firmly believe is multi-fold. First, tax cuts reduce the revenue of the federal government, meaning that, since our government will almost never cut military spending, it will instead cut funding for social welfare programs, meaning the lowest income families will actually have less spending power. Second, federal debt will have to increase to cover the deficiencies caused by the tax cuts. And … here is, perhaps, the biggest reason: GREED. Big businesses that benefit from tax cuts are typically corporations who owe their very existence to their stockholders. They will keep those stockholders happy with higher annual dividends before they consider paying their employees higher wages or increasing benefits, let alone hiring additional staff. Purchasing additional factories? Perhaps, but that is not likely to increase jobs significantly, especially with today’s rapidly growing technological advances cutting jobs in many fields.

Now why, you are asking, is Filosofa boring me to tears with all this? Because, friends, Donald Trump is proposing/planning to go far beyond what either Reagan or Bush did in order to help big businesses, and he is dead wrong. I won’t expound on the potential outcomes if he is fully successful in pushing his plans, for that is an entire topic in itself. However, he has already begun with his rollback of certain regulations for which we will pay a terrible price, with no benefit to those who most need it.

Take, for example, what he said last week in a speech in Missouri: “We must reduce the tax rate on American businesses so they keep jobs in America, create jobs in America and compete for workers right here in America — the America we love.” Excuse me, but a large portion of Trump’s own products are manufactured overseas, as I have mentioned in previous posts, and 100% of his daughter, Ivanka’s products are manufactured overseas. Put your money where your mouth is, Trump!

What has Trump done thus far to help businesses see higher profits? Let us look at a few:

He has postponed rules that protect workers from dangerous silica dust and beryllium

He has given green lights to the Keystone XL and Dakota Access pipelines, which will help create a few thousand very temporary construction jobs

He has pulled out of the Paris climate accord, is seeking to scrap rules against coal-fired power plants and allowed the dumping of coal waste in streams

He has claimed credit for the opening of the Corsa coal mine in Pennsylvania, even though the mine opened some two months before Trump was inaugurated

He claims to have kept some 1,200 jobs at the Carrier plant in Indiana from being moved to Mexico, but between layoffs and some jobs relocating to Mexico after all, the net number of jobs remaining in the U.S. is around 200

There is more, but this is enough for a wake up call, especially when we look at the cost of some of these moves, especially as pertain to the coal industry and oil pipelines. Coal companies dumping their waste in streams in their backyard obviously, to those of us with eyes and brains, poses a health threat for the families of those coal miners Trump claims to “love”. The rollback of regulations against coal-fired power plants and the blatant disregard for the environmental studies surrounding the pipelines is nothing short of criminal negligence and failure to protect the environment and those of us who inhabit this planet. Add to that, the fact that coal jobs may come back in very small numbers and for a short time, but overall, increased use of cleaner energy substitutes like natural gas, solar and wind have come too far and proven effective both in terms of a cleaner environment and cost-effectiveness to ever take a backseat to fossil fuels again.

In addition, Trump has been applauded by businesses for rolling back or repealing workplace regulations – safety regulations – that were costing businesses billions of dollars annually. I don’t know about you, but I would rather see OSHA do its job in keeping workers safe than trust businesses to take matters of worker safety into their own hands.

So what’s next on the Trump agenda? Why, tax cuts for business and industry, of course. And this brings me, after a circuitous route, but I hope one with some value, to the reason for this post. Tomorrow, Congress returns from its summer break, and among the first, highest-priority orders of business will be Trump’s budget. The key feature of said budget, from what I am able to discern, is increased military spending coupled with tax cuts, primarily large tax cuts for corporations.

Cuts in revenue, the result of cutting business taxes, must be offset by either cuts in spending or an increase in costly debt. One of the more egregious items reportedly in Trump’s budget proposal is to cut money for mine safety enforcement and eliminate funding for the Appalachian Regional Commission, which has aided hundreds of coal counties by financing job retraining and social services, helping to cut Appalachia’s poverty rates nearly in half.

The most recent jobs report shows that job growth is slowing and wage rates are stagnant. No surprise there, as the job growth rates over the first six months of Trump’s administration were merely a continuation of job growth under Obama. Slow job growth with stagnant wage rates is not exactly a win-win, and Trump has adamantly argued against a raise in the federal minimum wage.

The budget debate is just about to begin in Congress, and I expect it to be contentious, especially in light of funding that will be required to help with disaster recovery from Hurricane Harvey. One thing that is not needed, that will not help We The People, is tax cuts for large corporations and the top 1%.

Using a breath method is best for working. The third eye needs a guru to help open it. I have been doing it since 1971 I have some eye problems too. Nothing is perfect. I feel it helps me though, perhaps I’m delusional? There are many eye exercises out there. Maybe it’s your karma? I could offer all sorts of advice, of course, yet I expect you have had lots already. There are many benefits to meditation. The notion that one has to sit in a corner, to do so, is erroneous. What is prayer but an outward manifestation of an inward activity. Stilling the mind is hard because the mind is like a devil and always tries to hold on to your will and bend it to constant activity. Nothing wrong with the mind yet we hear all the time about mental sickness. This is a way to help the mind repair itself. I’ll get down off my soapbox now. This is only something you can do for yourself. Looking for gold takes some work. Good luck! Cheers Jamie.

Zey seek hi here and they seek him zer, they seek the scarlet pimpernel everywhere … ~ Baroness Orczy Seriously? You have to find for yourself.

Ever read “Pilgrim’s Progress? John Bunyan, if I remember? I haven’t read it in years but the parallels are good, even today. Find”Autobiography of a Yogi” Paramhansa Yogananda. Then you may find it seem more clear? Cheers Jamie

No I never knew Keynes of course not but supply side and also Keynes economics we were taught in school. When Mr. Reagan announced his new emphasis on economic theory i.e. ‘trickle down”. In reality was an old model of supply-side or trickle down, once known as horse and sparrow. Being, if you feed a horse enough oats some will trickle through for the sparrows. https://en.wikipedia.org/wiki/Trickle-down_economics

Of course we know bullshit when we hear it and any notion that poor will benefit. is ridiculous. No matter how much oats you give a horse. They will vacuum them up. The sparrows really have to move quickly. The horse will lick them up before the sparrow get’s an opportunity. Same as the wealthy. Trickle down … haha. It is as funny in a black way as it was when Ronald Reagan seriously tried on that hat. The emperor has no clothes, Just a funny looking hat. Cheers Jamie

Haven’t a clue what to say to this. World events are spiralling into uncontrollable animosities and spiteful finger pointing. The climate is running amok in places, and Trumpest is living in La, La Land. Nothing makes much sense anymore, especially fiscal due diligence which seems to be based on fairytale economics. Sad times for Americans and dreadfully unstable times for the world!

Sad to say that it won’t likely end in 2017. Even if impeachment proceedings were started today, the wheels of justice are rusty and turn ever so slowly. And … I’m even sadder to say, in answer to your second question … I think the repercussions of this lunatic presidency will be felt for many years, possibly decades. You and I won’t likely live to see a return to ‘normal’. I’m typically an optimist, but also a pragmatist and at times a cynic. I see the divisions in this country, the hatred that bubbles up almost daily between races, the political polarization, and I think it will be a long time before we learn to pull together again. Did we ever, really, or was it all just on the surface, with this divisiveness simply covered up by a thin veneer? What a mess we have made, yes?

Dear Jill,
There have been several studies, one by a conservative resource that has discredited the republicans’ trickle down” theory. It certainty didn’t .work in the State of Kansas who did enact tax cuts bigly for businesses. The state is now in serious financial trouble because the increase in revenues did not materialize, plus there were not the expected job increases.
Where are those republican deficit hawks, hiding?
Hugs, Gronda

I don’t know where they are hiding, but they better dust themselves off and come OUT of hiding … soon! It might help if more people started paying attention to what their members of Congress are doing and started holding them accountable, but … sigh … that is unlikely to happen. Hugs!!!

You are so right … they keep going in circles like a dog chasing its tail … only the dog is cuter. Lessons learned from history seem to fade pretty quickly, thus we keep going back and making the same mistakes. The Chinese believe that history is cyclic, and I’m inclined to agree.

I suspect this will be a fight for the entire month of September. The current budget runs out on 30 September, and I’m betting that either … a) the budget, after much tweaking and arguing and compromise, will be passed at 23:59 on the 30th, or b) the current budget will be extended and the debt ceiling raised. Of course, my track record for predictions is woefully poor these days … remember that I am the one who said Trump didn’t stand a snowball’s chance in hell of winning the election. 🤓

OH NO … MATH??? I have to do MATH??? I was a CPA … I can’t do math! Oh wait … where’s that bloomin’ calculator? Okay, so that puts you … GASP … you are older than me??? Born in 1949 … Keynes died in 1946 … so I don’t think you knew him personally … 🙂 But I am still in shock that you are actually 2 years older than me! I somehow pictured you as being in your 30s! Cheers!!!

No I never knew Keynes of course not but supply side and also Keynes economics we were taught in school. When Mr. Reagan announced his new emphasis on economic theory i.e. ‘trickle down”. In reality was an old model of supply-side or trickle down, once known as horse and sparrow. Being, if you feed a horse enough oats some will trickle through for the sparrows. https://en.wikipedia.org/wiki/Trickle-down_economics

Of course we know bullshit when we hear it and any notion that poor will benefit. is ridiculous. No matter how much oats you give a horse. They will vacuum them up. The sparrows really have to move quickly. The horse will lick them up before the sparrow get’s an opportunity. Same as the wealthy. Trickle down … haha. It is as funny in a black way as it was when Ronald Reagan seriously tried on that hat. The emperor has no clothes, Just a funny looking hat. Cheers Jamie

No, dear Jamie … I was not at all implying that you are immature! But rather that you have a mischievous side, a playful side … more young at heart, but never immature.

Yes, each political generation seems to feel compelled to try the same old theories that didn’t work last time, nor the time before, but they are so sure it will work this time … or rather, they figure that they can convince the people that it will work. It rather reminds me of that oft-quoted definition of insanity: doing the same thing over and over and expecting a different result.

Thanks Jillybean … I was only teasing about the age thing … it is always flattering when people think you are younger than you are. Yet age creeps up on us all every day. I do meditation each day, so perhaps that’s why? While I’m grey, I still have my head of hair. Perhaps that meditation thing works? Does for me. Thanks, Cheers Jamie BTW Tit for tat, I was thinking you were in your forties, from the tiny photo that accompanies your blog. I knew you had more experience than that but it’s always possible, I suppose? …J.

Perhaps I should try that meditation thing. I’m not sure it would work, however, as I have what I call ‘mind bounce’, and my mind is never still … it is like a pinball, bouncing from post to post. And yes, when that picture was taken, I WAS in my 40s. But now, at 66, I am an old hag who is going blind. Sigh.

There is always hope. Meditation using the third eye can help the eyes. For it is an exercise. The point of meditation is to learn to still the mind. A person cannot expect to be an expert, right away. A little bit each day. There are different types of meditation. For different reasons. The sort you can do while working is of great benefit. Not just working, any activity. Stilling the mind is the objective. Learning to control the mind. For it makes a good servant and a lousy master. I am sure you’re not a hag. Or a harridan.

Another benefit of meditation IMO, is the warm fuzzy it gives a person. I notice if or when I talk about it, others give me a stare as if they expect a lecture? It’s a benefit for myself only. Not others. They can find their own benefits. I happen to believe in and know God. Only found inside ourselves. One can deny the existence and I am not going to try to convince them otherwise. God has no religion, no books or buildings. Those are for people. They do that. God only has love. The more we give out. The more is reflected back in … How does it go? “Seek and ye shall find, knock and the door will be opened, ask and it will be given”. Cheers Jamie

Now if I can meditate while working, then maybe. I always thought one had to sit perfectly still and repeat a mantra over and over. Perhaps I shall look into the ‘third eye’ and meditation while working. I am in despair over my vision, for once it is gone, I have no life left. I will look more into meditation, since you swear by it.